REG - Shanta Gold Limited - Annual Results for the year ended 31 December 2022
29/03/2023 07:00
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RNS Number : 5436U Shanta Gold Limited 29 March 2023
29 March 2023
Shanta Gold Limited
("Shanta Gold", "Shanta", the "Group" or the "Company")
Full Year Results for the year ended 31 December 2022 and
Posting of Annual Report and Notice of AGM
Shanta Gold (AIM: SHG), the East Africa-focused gold producer, developer and
explorer announces its production and operational results for the year ended
31 December 2022 ("FY2022" or the "Year") for its East African assets,
including New Luika Gold Mine ("NLGM" or "New Luika") and Singida Project
("Singida") in Tanzania and West Kenya Project ("West Kenya") in Kenya. The
Group has also today published its Annual Report for the year ended 31
December 2022 and posted its Notice of Annual General Meeting to shareholders,
both of which are available on the Company's website at www.shantagold.com.
Eric Zurrin, CEO, commented:
"The past year has been a successful one for Shanta, with our financial
performance improving year on year, strong operational progress being made
across all three of our assets and most importantly, the team maintaining our
excellent safety record.
An encouraging end to the year saw the Company finish with gold production of
65,209 ounces at New Luika, up 18% on the prior year. Elsewhere, the Singida
Project is nearing completion on time and on budget, and we are set for first
gold pour in March 2023. This is a transformational moment for Shanta, as the
Company transitions to a 100,000 ounce per year gold producer. The Project
will quickly move from being a cost centre to a cash generator and further
allow us to reinvest into exploration elsewhere in the portfolio. Some of that
investment will continue to be deployed in West Kenya, where we have seen some
fantastic drilling results during the year. With the significant update to the
MRE and the growing number of targets discovered in the region during 2022, we
are convinced that West Kenya has the potential to become one of Africa's next
quality, high-grade gold mines.
2022 has seen the Company continue to place a huge emphasis on our partnership
with local communities, as we provided agricultural, educational and medicinal
support to those villages in close proximity to New Luika and Singida.
We look forward to 2023 with excitement as all three assets in the portfolio
offer serious growth opportunities for the Company. With a healthy balance
sheet providing a strong platform, shareholders can look forward to a year of
growth in the year to come."
2022 Highlights
Financial
· Revenue of US$114.1 million ("m") (2021: US$103.6 m);
· Gross profit of US$25.4 m (2021: US$26.0 m);
· Adjusted EBITDA(1) of US$29.8 m (2021: US$25.2 m);
· Operating profit of US$6.0 m (2021: US$4.7 m);
· Cash, and available liquidity(3) of US$13.0 million ("m") at 31
December 2022, including US$2.5 million undrawn from the Working Capital
facility;
· Gold sales achieved an average selling price of US$1,791 /oz during
2022 (2021: US$1,801 /oz);
· Total VAT refunds received of US$9.6 million;
· Adjusted Operating Cash costs of US$1,014 /oz and an AISC of US$1,271
/oz, in line with AISC guidance of US$1150-1275 /oz; and
· Final 2021 dividend paid in July 2022 and 2022 interim dividend paid
in November 2022, totalling approximately US$2.5 million. Final dividend
proposed by the Directors of 0.1 pence per share (approximately US$1.3
million) for approval at the 2022 AGM in April 2023.
Operational
· Excellent safety record with TRIFR rate of 0.85 (Singida) and 1.27
(NLGM) in 2022);
· Record annual throughput of 874,703 tonnes ("t") milled, up 5% from
2021;
· Gold production of 65,209 ounces ("oz"), up 18% from 2021; 4%
variance to updated production guidance of 68 Koz (target range set 12 months
ago of 68-76 Koz);
· Exploration in 2022 included comprehensive targeting studies for NLGM
and the Lupa Goldfields resulting in a target pipeline for all stages of
exploration targets;
· Singida Project is 90% complete as at the end of December 2022, on
budget and on track for first production in March 2023
- Singida increases Group production by 45-50% to approximately
100,000 oz pa;
- Singida adds a second revenue stream across the portfolio while
further strengthening our diversified portfolio of assets in East Africa;
- In 2022, geological mapping, regional soil sampling, geophysics
reinterpretation and district target generation was completed that
significantly enhanced the Singida upside potential for mine life extension;
· Extension of current reserve life at NLGM, now through Q1 2028,
following successful exploration programmes on an optimised budget in 2022,
adding a further 92,500 oz of contained reserves; and
· West Kenya Phase 2 drilling continued to deliver encouraging assay
results
- Significant update to Mineral Resource Estimate to 1.76 Moz
contained resources relating to Isulu and Bushiangala deposits with Ramula in
February 2023 for the year 2022;
- Phase 2 drilling programme continued at the West Kenya Project with
further high-grade intercepts and multiple occurrences of visible gold
identified in drilling intersections, bringing the total number of visible
gold identifications to 67 intersections at Isulu and Bushiangala across 165
holes drilled since January 2021;
- Work undertaken at newly discovered and existing targets including
Miruka, Anomaly 22 and Kimingini, planned to continue in 2023.
Sustainability
· In 2022, Shanta's direct economic contributions totalled US$148.8
million, which includes: US$53.7 million in cash operating costs; US$13.6
million in employee wages and benefits; US$54 million in capital expenditure;
US$26.8 million in royalties, taxes, duties, levies, and other payments to
government, and US$0.3 million to community investments and donations;
· Shanta assisted over 2500 farmers with farming donations and
technical farming support;
· Improved the infrastructure of various primary and secondary schools
in villages surrounding operations by building new ablution blocks,
classrooms, providing desks and learning materials; and
· Sponsored advanced medical equipment to local village dispensaries
and maternity wards near the New Luika Gold Mine
2023 Guidance
· Annual guidance for NLGM of 66,000 - 72,000 oz at AISC of US$1,200 -
1,300 /oz
· Singida production guidance to be released following commencement of
commercial production. Previous LoM plan guided for approximately 32,000 oz
pa;
· Underground grade control drilling currently covering almost 85% of
Q1 2023 production and 73% of full year 2023 planned ounces has de-risked the
2023 production plan.
Note:
1. Adjusted EBITDA is earnings before interest, tax, depreciation, and
amortisation which has been derived as operating profit exclusive of
depreciation/depletion of tangible assets, amortisation of intangible assets
and exploration expenditure at the West Kenya Project totalling US$6.6
million.
2. AISC figures published include development costs, in line with the WGC
definition
3. Available liquidity has been derived as unrestricted cash, the sale value
of doré available for sale at the end of the Period (net of royalties and
expected selling costs), and undrawn portions of the Working Capital facility.
Board changes
The Company announced that Luke Leslie, Chief Financial Officer, has informed
the board of his decision to step down from his role in order to pursue other
opportunities effective 28 March 2023.
Annual General Meeting ("AGM")
The AGM of the Company will be held at 11 New Street, St Peter Port, Guernsey,
GY1 3EG on 28(th) April 2023 at 11.30am. The Notice of AGM has been sent to
shareholders today and is available on the Company's website.
Enquiries:
Shanta Gold Limited
Eric Zurrin (CEO) +44 (0) 14 8173 2153
Luke Leslie (CFO)
Nominated Adviser and Joint Broker
Liberum Capital Limited
Scott Mathieson / Ed Thomas / Nikhil Varghese +44 (0) 20 3100 2000
Joint Broker
Tamesis Partners LLP
Charlie Bendon / Richard Greenfield +44 (0) 20 3882 2868
Public Relations
FTI Consulting
Sara Powell / Nick Hennis +44 (0) 20 727 1000
About Shanta Gold
Shanta Gold is an East Africa-focused responsible gold producer, developer,
and explorer. The company has an established operational track record, with
defined ore resources on the New Luika and Singida projects in Tanzania, with
reserves of 625 koz grading 2.91 g/t, and exploration licences covering
approximately 800 km2 in the country. Alongside New Luika and Singida, Shanta
also owns the high-grade West Kenya Project in Kenya and licences with
resources of 1.76 million ounces including 722 Koz in the Indicated category
grading 11.45 g/t. With a healthy balance sheet, a growing diversified
portfolio and a maiden dividend paid in 2021, Shanta offers a resilient
investment opportunity for the near and long-term. Shanta is quoted on
London's AIM market (AIM: SHG) and has approximately 1,051 million shares in
issue.
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulation
(EU) No. 596/2014 as amended by The Market Abuse (Amendment) (EU Exit)
Regulations 2019.
Chairman's statement
Despite the challenges posed by global financial trends seen in 2022, Shanta
remained resilient and adaptable, ensuring that we continued to serve our
shareholders and other stakeholders effectively. We also remained committed to
corporate social responsibility, and achieved impressive operational and
performance results while maintaining an outstanding safety record,
The past year was a transition year for the company where the ongoing
construction of the new Singida Gold Mine and a successful exploration
campaign at West Kenya laid the groundwork for transforming Shanta into a
100koz per year gold producer with an attractive investment case.
Luke Leslie, Chief Financial Officer, has informed the board of his decision
to step down from his role in order to pursue other opportunities. I would
like to take this opportunity to extend my thanks to Luke for his contribution
to Shanta in particular over the last 5 years as CFO and Head of M&A.
During this time he was instrumental in the successful turnaround of Shanta
which included the acquisition of the West Kenya Project in 2020. On behalf of
the board, we wish him all the best in his future endeavours.
Performance and operating highlights
Once again, Shanta's exploration team have manged to replace mined ounces for
the 4(th) consecutive year and extend New Luika's mine life, now through to Q1
2028 from Q4 2026. This ensures long-term, sustainable returns for our
shareholders. The ongoing exploration campaign at Shanta's West Kenya Project
continued in 2022 resulting in the resource base increasing to 1.76 Moz, an
increase from 1.55 Moz at the beginning of the year, and Indicated Resources
increasing to 1.14 Moz. Our West Kenya project now accounts for 48% of our
total resources.
During the year, the construction of the Singida Gold Mine progressed as
planned and on budget, a testament to the project management team given the
inflationary cost pressures this year throughout the industry. With first
gold pour planned for March 2023, Singida is currently forecast to add 45-50%
to the Group production profile, enhancing the Company's short-term future and
diversifying the asset portfolio. We are confident in delivering further
sustainable returns to our shareholders while transforming the economic
potential of the local region in which the mine operates.
Corporate Social Responsibility (CSR)
Shanta recognises that its success is largely as a result of the wide ranging,
powerful benefits of a strong CSR strategy. We recognise the importance of
entrenching a local content strategy throughout our operations including job
creation and employment, payments to government and local investment. In
2022, Shanta's direct economic contributions totalled US$148.8 million, which
includes: US$53.7 million in cash operating costs; US$13.6 million in employee
wages and benefits; US$54 million in capital expenditure; US$26.8 million in
royalties, taxes, duties, levies, and other payments to government, and US$0.3
million to community investments and donations. Of the total economic value
distributed, 95% was attributed to Tanzania, with the remaining 5% to
exploration and evaluation activities in Kenya.
Throughout the year, the Company also supported various community initiatives
to directly support local communities which included assisting over 2500
farmers with farming donations and support, improving the infrastructure of
various primary and secondary schools in villages surrounding our mines by
building new ablution blocks, classrooms, providing desks and learning
materials, The company also sponsored advanced medical equipment to local
village dispensaries and maternity wards near the New Luika Gold Mine. These
are just some of the initiatives undertaken in the year and highlights our
commitment to the local communities in which we operate.
Environmental, Social and Governance (ESG) reporting
As a responsible gold miner, we are committed to ensuring transparent and high
quality ESG and sustainability reporting as we understand that investors and
other stakeholders consider governance as critical to business success. In
2022, Shanta released its inaugural 2021 Sustainability Report where we looked
to strengthen our sustainability governance by identifying the policy gaps
that exist and benchmarking against peers. The 2022 report due to be announced
in April 2023 will build on and refine our ESG reporting.
Year ahead
As Singida moves into production and transitions from a cost centre to a cash
generator, our exploration focus will pivot back to mine life extension at
both the Singida and New Luika mines, in order to unlock long term shareholder
value. Resource growth at West Kenya continues to impress and is an important
future pillar of our investment case. Shanta will continue to develop this
resource in 2023 and progress the Feasibility Study workstream with the goal
of developing a mine in Kenya in the medium term.
With the increasing diversity and complexity of our operations, our Board
concluded in our annual Board Review that we should appoint additional
Independent Non-Executive Directors and we expect to make announcements on
this in the near future.
Finally, I would like to thank the Shanta team and our wider stakeholders for
their continued commitment, support, and efforts which have delivered the
encouraging results seen in this annual report.
Anthony Durrant
Chairman
28 March 2023
Chief Executive Officer's review
2022 was a significant year for Shanta and I am pleased that the Company
enjoyed a strong end to the year at all of our assets across the portfolio.
Our producing mine New Luika, saw record annual throughput and full year
production of 65,209 ounces, an 18% increase vs last year's production
figures.
Despite a near miss on guidance, I am happy to report that there are numerous
initiatives underway and in place for 2023 to decrease operational risks and
optimise production. These include the team adding 40% to the open pit mining
capacity with the addition of mining equipment from a second contractor as
well as Shanta taking the delivery of a newly purchased underground production
rig.
The completion of construction at the Singida Gold Mine is fast approaching
having been kept on track and on budget throughout the year. Singida will
transform Shanta into a 100,000 oz/pa gold producer with a diversified
resource base whilst group-wide resources have increased to 3.7 Moz from 1.2
Moz five years ago.
Our exploration campaign conducted at West Kenya during the year, continued to
deliver, with some of the best drilling results the Company has seen in its
history. As we diversify our portfolio in Tanzania with Singida's first gold
pour in March 2023, West Kenya demonstrates the Group's clear long term growth
potential to shareholders.
Last year, we released our inaugural Sustainability Report, which highlighted
our dedication as a company to operating and collaborating in a responsible
manner. In 2022, we continued our ESG journey ensuring that our sustainability
reporting accurately reflects our commitment to sustainable practices and
responsible business operations. We look forward to building on this progress
in the coming years and continuing to prioritize sustainability in all aspects
of our business.
HIGHLIGHTS
Exceptional safety record
As always, the wellbeing of all our employees is our number one priority, and
we have an uncompromising approach to safety standards. Operations at the New
Luika Gold Mine achieved a Total Recordable Injury Frequency Rate ("TRIFR")
per 1 million hours worked of 1.27 and the Singida team achieved an
outstanding 0.85, both significantly below the global industry average of
2.90, as measured by the International Council of Mining and Metals.
The Singida Gold Mine
Singida remains on track for first gold pour in March 2023 transforming Shanta
Gold into a 100,000 oz/pa producer and diversifying Group cash flow. The
Singida project team has done a fantastic job over the year keeping the
construction of the Singida mine on schedule and on budget. While the rest of
the industry was impacted by the global inflationary pressures, no material
capital cost inflation has been incurred in the construction costs owing to
orders for major capital items being placed in early 2021 prior to
inflationary pressures and excellent supervision and flexibility from the
Singida team in Tanzania.
As at year end, the Singida project was 90% complete with total project
capital expenditure amounting to $26.8 million in 2022, and $32.4 million to
date. Initial startup operations have also been significantly de-risked with
the stockpile of crushed ore now at 32,300 tonnes (equal to over one month of
supply) and the Run of Mine stockpile of 166,600 t grading an average of 2.58
g/t containing 13.8 koz of gold (equal to approximately 4 months of
processing).
In terms of long term potential, geological mapping which took place in 2022
shows upside potential for mine life extension. To help achieve this goal,
Shanta welcomed back George Kondela, the new General Manager of Singida, in
January 2023 to lead the Singida Gold Mine and mine life extension efforts.
George is a trained geologist and has significant experience in this area with
a track record of successful reserve life expansions. The project's location
within a greenstone deposit also means it is well suited to further
exploration growth.
Shanta's impressive safety standards are being carried through to its Singida
operations with a robust health and safety framework having been maintained
throughout construction.
We are committed to developing and promoting local talent at the Singida Gold
Mine and have directly employed 474 employees and contractors, all of whom are
Tanzanian nationals. As we continue to invest in community initiatives that
benefit the people of the Ikungi region, we are confident that the project
will deliver transformational change. Our efforts have already begun with the
upgrade of local schools in Malumbi and Samburu villages, improvement of
roads, several water projects, and the renovation of a local dispensary. We
are pleased with these early steps and look forward to making a positive
impact in the region.
The West Kenya Project
The West Kenya project has achieved impressive growth and results, as
evidenced by the latest Mineral Resource Estimate which has increased to 1.76
Moz, while Indicated Resources to 1.14 Moz. The Indicated Resource ounces also
demonstrate high-grades, averaging 11.45 g/t Au across 722 Koz, indicating
potential for high margin cash flow in future operations.
In 2022, the Ramula target was one of the focus areas for exploration drilling
which has contributed to the significant increase in Indicated Resources
throughout West Kenya. The potential for open pit mining at Ramula is
particularly appealing in terms of cost and timing, adding to the
attractiveness of the asset's development.
As we move towards the first gold pour at Singida in March 2023, the ongoing
exploration success at West Kenya is a source of great excitement for the
Shanta team and all stakeholders. Our unique investment proposition, driven by
a clear growth story and an ever-increasing production profile, sets us apart
from our peers and gives us confidence in the Company's near to mid-term
prospects.
In 2023, the West Kenya Project Feasibility Study workstream, led by an
internal owners team, will continue. The team will focus on developing and
evaluating mining conceptual models, which marks an exciting initial step
towards converting the West Kenya Project from an exploration project to a
producing entity.
Portfolio-wide exploration
In 2022, Shanta has once again succeeded in extending the life of NLGM through
the addition of new reserves, now projecting to run until Q1 2028, as compared
to Q4 2026, as measured 12 months ago at the end of 2021. This marks the
fourth consecutive year in which the mine life has been extended by at least
one year through successful exploration, highlighting the importance of this
approach in achieving long-term, sustainable returns for our shareholders.
In 2022, we invested US$2.1 million in exploration in Tanzania which is less
than half of what was spent in 2021. This was due to prioritizing funding for
the construction of Singida. Despite this reduction, we added 92,500 ounces of
new reserves at NLGM. Our Tanzanian assets contain a total of 625,000 oz of
compliant gold reserves with an average grade of 2.91 g/t. These reserves are
divided between the NLGM and Singida projects, with NLGM contributing 394 Koz
of reserves grading at 2.85 g/t, and Singida contributing 231 Koz of reserves
grading at 3.01 g/t. Future mine life potential comes from a further 1.2 Moz
of resources at NLGM and Singida, not currently in the mine plan and available
for future exploration.
With the Singida Gold Mine transitioning from a cost centre to a cash
generator as it moves into production, our exploration focus will shift
towards extending the mine life to create long-term value for shareholders.
Singida is a greenstone project located within the highly productive Lake
Victoria Gold Field and has only undergone around 75,000 meters of drilling,
presenting a significant opportunity for reserve addition and mine life
extension.
Resource growth at West Kenya remains impressive and serves as an important
aspect of our investment strategy. At present, our West Kenya project accounts
for 48% of our total resources.
Status of VAT refunds
At the end of the year, the Company had a VAT receivable balance of US$29.3
million, of which $23.1 relates to the Company's input VAT refund application
for the period from July 2017 to June 2020. The Company has sought
comprehensive legal and tax guidance to recover the VAT and is pursuing an out
of court settlement to recover the remaining balance, as detailed in note 3.
Cash refunds and offsets of US$9.6 million were received in the year, in
respect of post June 2020 VAT, indicating positive engagement with the
Tanzanian Revenue Authority ("TRA"). The remaining current VAT receivable is
awaiting verification audit, after which it can be utilized for additional
refunds or offsets against corporate income tax. The Company has sought
comprehensive legal and tax guidance to recover the VAT and is pursuing an out
of court settlement to recover the remaining balance, as detailed in note 3.
OPERATIONS REVIEW
New Luika Operations Review
2022 saw several operating achievements which include a record annual
throughput of 874,703 tonnes milled, which represents a 6% increase from 2021,
and gold production of 65,209 ounces, up 18% from the previous year, and 4%
below the annual production target of 68,000 oz. This near miss can be
attributed to operational challenges seen at New Luika, where steps have been
taken to decrease operational risk.
The State-owned grid experienced power instability throughout the country,
which led to a reduction in the reliability of power for underground equipment
at NLGM. In Q4, the contribution of State-grid power to NLGM improved with the
arrival of seasonal rains and the increase of hydro power in country. A
long-run average of 25% of power sourced from the State-grid is usually
expected when power shortages are supplemented by Shanta's HFO power station.
The reduced availability of open pit and underground mining equipment impacted
the mine plan in H2. To support surface operations, open pit mining equipment
arrived at NLGM in December 2022 from a second mining contractor, increasing
the open pit mining fleet capacity by around 40% by the end of the year.
In addition, a newly purchased Sandvik underground production rig was fully
commissioned in December 2022, resulting in a 94% increase in total
underground production meters to 10,439 meters compared with the first 11
months average of 2022 of 5,377 meters. At the end of December 2022, there
were 10 underground stopes ready and available for drilling compared to a NLGM
base case average of 3 at any one time.
AISC(1) for the year was US$1,271/oz and within the AISC cost guidance of
US$1,150-1,275 /oz set for 2022 and a 6.4% decrease on the 2021 AISC. The
improvement was as a result of more ounces produced and rigorous cost
management during a year impacted by global inflation.
FINANCIAL OVERVIEW
Turnover for the year from sales of gold amounted to US$114.1 million,
compared to US$103.6 million in 2021, a 10.1% increase attributable to
increase in gold ounces recovered. Shanta sold 63,695 oz of gold in 2022
(2021: 57,517 oz) with all sales completed at spot price, with an average
selling price of US$1,791 /oz during 2022 (2021: US$1,801/oz).
Operating profit for the year amounted to US$6.0 million (2021: US$4.7
million), the increase being mainly attributable to a combination of more
revenue being earned in the period and less expenditure relating to the West
Kenya Project in 2022 when compared to 2021. Adjusted EBITDA(1) was US$29.8
million (2021: US$25.2 million).
Following committed and positive engagement with the Tanzania Revenue
Authority ("TRA"), total VAT cash refunds of US$4.1 million were received by
the Group in 2022, with a further US$5.5 million offset against income tax
liabilities. US$4.6 million has also been verified for refund by the TRA in Q1
2023.
At the end of December 2022, remaining gold price protection outstanding
relating to the Standard Bank loan and Working Capital facility in the form of
Zero Cost Collars totalled 15 Koz including 8 Koz covering the period January
to June 2023 between US$1600-1950 /oz, and 7 Koz covering the period January
to April 2023 between US$1725-1756 /oz. The hedge contracts are largely
aligned with final Singida construction costs. No additional hedges will be
added.
Sustainability
In 2022, the Group published its inaugural stand-alone Sustainability Report
which saw Shanta report on key sustainability issues that are most material to
Shanta's stakeholders. This year saw the Company developing its ESG
reporting function and metrics to be more in line with ESG and Sustainability
Reporting Standards. The 2022 Sustainability Report will be published in April
2023 and will be Shanta's second Sustainability Report reflecting our
commitment to robust environmental, social and governance ("ESG") reporting
and operating as a responsible miner. It also provides insight into the
priorities and key projects that shaped the year and presents our 2022
performance.
Community Investment
Shanta considers shared success as a foundation of its business model,
acknowledging that its commercial achievements stem from productive
collaborations with the communities where its operations are based. The
Company endeavours to establish mutually beneficial relationships by
generating employment opportunities, investing in local economies, and
fulfilling its tax obligations. Through active participation and cooperation
with local communities and government agencies, Shanta is working to improve
living standards and create opportunities for those communities in which it
operates.
In 2022, Shanta's direct economic contributions amounted to US$148.8 million.
This comprises of US$53.7 million in cash operating costs, US$13.6 million in
employee wages and benefits, US$54.3 million in capital expenditure, US$26.8
million in royalties, taxes, duties, levies, and other payments to the
government, and US$0.3 million in community investments and donations.
Tanzania received 95% of the total economic value distributed, while
exploration and evaluation activities in Kenya received the remaining 5%.
Shanta is one of the largest gold mining contributors in terms of taxes paid
in Tanzania. We provide a comprehensive disclosure of our tax and overall
economic contributions in our Annual Report, which includes details of our
payments to the government.
Shanta has a robust Corporate Social Responsibility (CSR) program that has
been designed based on community initiatives developed in collaboration with
significant community and regional stakeholders. Shanta's community investment
projects focus on Water, Education, Livelihood, and Health initiatives, which
are the primary pillars of the program. These initiatives aim to benefit the
local communities in the vicinity of Shanta's New Luika, Singida, and West
Kenya operations.
Some of the projects the Group carried out in 2022 are mentioned below:
Education
Shanta firmly believes in providing quality education as a means of promoting
lifelong learning and sustainable development in local communities. Over the
years, the company has undertaken various education projects such as
infrastructure development, sponsoring underprivileged students, and expanding
access to Information and Communications Technology "ICT".
In 2022, Shanta continued to prioritize education with a focus on the Songwe
region, West Kenya, and Singida. The company sponsored 77 secondary school and
231 primary school students from underprivileged families, providing them with
uniforms, shoes, and stationery.
Shanta constructed new infrastructure, including a two-unit teacher's house in
Miembeni Primary School, four classrooms and two teachers' offices in Mbangala
Secondary School, and four classrooms with toilets in Mlumbi and No 7 schools.
Additionally, the entire administration block at Bushiangala Primary School in
West Kenya was renovated.
Shanta also worked towards improving access to ICT equipment and learning,
completing the construction of a computer lab at Saza Secondary School and
partnering with Vodacom Tanzania to install a communication tower and
distribute 50 tablets with education materials.
Water
Access to water is a major challenge for many residents in the Songwe region
of Tanzania due to limited water infrastructure and unpredictable rainfall.
Shanta has a history of supporting initiatives to improve water
infrastructure, including drilling boreholes, constructing pumps for existing
wells, and building storage facilities in local villages.
In 2021, Shanta invested in a pipeline connecting the Luika River Dam to
Mbangala village, spanning 4 km, with the objective of providing reliable
and clean running water to around 7,600 people. In 2022, Shanta extended this
pipeline and installed additional water stations near the Mbangala Primary
School, Mbangala Medical Centre, and the furthest dwellings.
In the West Kenya license area, Shanta implemented a water harvesting
initiative in two affected schools, Nyangulu Mixed Secondary School and
Marende Primary School, around the Ramula prospect area. The initiative
involved installing rainwater harvesting infrastructure, including guttering
and water storage tanks. Shanta also involved the community in the project,
encouraging them to provide locally available materials and casual labour. The
initiative has benefited both schools and neighbouring households, providing
clean water to a population of approximately 1,500 people.
Livelihood
Farming and artisanal mining are key income generating activities in Songwe,
Singida and near our work in West Kenya. Shanta has supported a range of
livelihood programmes to support and grow the economic prospects of our local
communities.
We continue to support local farmers in Songwe though our Mining Agriculture
Improvement Program ("SMAP") as well as our Saza Village Beekeepers group. The
number of farmers engaged with our agricultural schemes has grown
exponentially since inception in 2017. In 2022 Shanta sponsored 8 farmers
representatives and 2 beekeepers representatives to the annual National
Farmers exhibition which takes place annually. These representatives managed
to showcase their products as well as having the opportunity to learn from
other farmers and supplier attending the exhibition.
In 2022 Shanta continued to support members of its programme by providing
training and donating planters, seeds, and fertilizer. In addition, the
harvest which was the result of several years' work with the community yielded
1,600,000 kg and 1,350,000 kg of Sunflower. Sesame harvest resulted in a total
US$1.9 million of income and Sunflower harvests resulted in US$580k of income.
This meant that US$2.5 million was distributed directly to the farmers as
direct income to support their family needs. For the 2023 season Shanta has
added further investment in the programme to continue to benefit the region.
Health
Access to quality healthcare services and the prevalence of long-term health
issues remain ongoing challenges in Kenya and Tanzania. In 2022, Shanta was
pleased to continue its partnership with PharmAccess Foundation and AMREF to
support the Innovative Partnership for Universal Sustainable Healthcare
(i-PUSH) project in West Kenya. This project aims to connect at least half a
million Kenyans to the National Hospital Insurance Fund (NHIF), which provides
medical insurance cover to its members.
Despite the importance of health cover, many families in our project areas are
not enrolled in the NHIF scheme due to financial constraints and a perception
that it is not an essential need. To address this issue, the program targets
women of childbearing age, and once enrolled in i-PUSH, they receive
subsidized health cover for a year. To support this initiative, we made a
financial contribution by donating 50% of the first year's annual premium for
500 low-income women in our project area, triggering the remaining 50%
contribution from i-PUSH. As a result, enrolled women and their families now
have access to NHIF cover for a year.
Furthermore, we fully renovated the Mang'onyi Dispensary in the Mang'ony
village close to Singida and are close to completing the construction of the
maternity ward, which is scheduled for completion in H1 2023.
Mitigating Environmental Impact
Climate Change
Over the past decade, the issue of climate change and how the mining industry
can respond to it has become increasingly pressing. As a responsible gold
miner, Shanta is committed to scrutinising its practices and mitigating its
impacts. While our operations require a stable and reliable power supply, we
recognise that our energy use and efficiency should incorporate efforts to
reduce our direct and indirect emissions. We understand the importance of
prioritising carbon removals and emissions reductions, and despite our size,
we aim to play our part in the global energy transition. Our stakeholders have
also identified energy use and efficiency as a priority, and we are determined
to reduce our energy consumption without compromising on operational
performance or cost control. We have already taken steps to improve our energy
consumption practices, but we are eager to learn from the best practices in
the industry and implement robust policies and measures.
Biodiversity
At New Luika, Shanta Gold is committed to reducing its impact on the
surrounding flora and fauna and protecting biodiversity. The company conducts
fauna surveys before working in undisturbed areas, communicates and enforces
strict rules for the protection of wildlife, and has clear guidelines for
relocating wildlife encountered by employees. Shanta Gold also reports
incidents resulting in harm to wildlife or damage to vegetation, monitors
flora and fauna biodiversity annually, and tests progressive mineral leaching
through water analysis. The mining activities at New Luika have disturbed less
than 1% of the Patamela Forest Reserve, and Shanta will rehabilitate the
disturbed areas.
Outlook
At New Luika, annual production guidance has been set to approximately 66,000
- 72,000 oz at an AISC of US$1,200 - 1,300 /oz. Production guidance for the
Singida Gold Mine will be released following the commencement of commercial
production, however the current life of mine plan guides for approximately
32,000 oz pa.
I want to express my gratitude to our shareholders, employees, Board members,
and partners for their unwavering dedication and support for the company
during this period. We are thrilled about the upcoming addition of the Singida
mine to our portfolio, the extremely encouraging West Kenya exploration
results and the ongoing replacement of reserves at New Luika, which all bode
well for the Company's future prospects in both the short and long term.
Eric Zurrin
Chief Executive
Officer
28 March 2023
SHANTA GOLD LIMITED
Consolidated statement of comprehensive income
31-Dec 31-Dec
2022 2021
Notes US$'000 US$'000
Revenue 4 114,055 103,571
Loss on non-hedge derivatives and other commodity contracts 5 (81) -
Depreciation (16,725) (16,533)
Other cost of sales (71,844) (61,078)
Cost of sales (88,569) (77,611)
Gross profit 25,405 25,960
Administration expenses (12,000) (10,160)
Exploration and evaluation costs (7,370) (11,133)
Operating profit 6,035 4,667
Finance income 6 425 3,012
Finance expense 7 (3,535) (6,679)
Profit before taxation 2,925 1,000
Taxation 9 (5,224) (7,168)
Loss for the year attributable to the equity holders of the parent Company (2,299) (6,168)
Loss profit after taxation (2,299) (6,168)
Total comprehensive expense attributable to the equity holders of the parent (2,299) (6,168)
Company
Loss earnings per share attributable to the equity holders of the parent
Company
Basic and diluted loss per share (US$ cents) 10 (0.220) (0.589)
The loss for the year and the total comprehensive expense for the year are
attributable to the equity holders of the parent Company. There are no
non-controlling interests. The items in the above statement are derived from
continuing operations.
Consolidated statement of financial position
31-Dec 31-Dec
2022 2021
Notes US$'000 US$'000
ASSETS
Non-current assets
Intangible assets 11 43,343 43,343
Property, plant and equipment 12 115,731 89,656
Right of use assets 13 2,740 2,313
Other receivables 17 22,064 22,698
Total non-current assets 183,878 158,010
Current assets
Inventories 16 36,207 27,234
Trade and other receivables 17 10,495 7,046
Cash and cash equivalents 3,828 13,214
Total current assets 50,530 47,494
TOTAL ASSETS 234,408 205,504
CAPITAL AND RESERVES
Equity
Share capital and premium 22 211,540 211,540
Share option reserve 23 - 148
Translation reserve 450 450
Shares to be issued - -
Retained deficit (60,023) (55,356)
TOTAL EQUITY 151,967 156,782
LIABILITIES
Non-current liabilities
Loans and other borrowings 19 19,316 3,454
Provision for decommissioning 21 12,266 7,500
Provision for deferred taxation 9 11,180 12,381
Total non-current liabilities 42,762 23,335
Current liabilities
Trade and other payables 18 26,208 17,169
Loans and other borrowings 19 8,126 2,823
Derivative financial liability 81 -
Income tax payable 5,264 5,395
Total current liabilities 39,679 25,387
TOTAL LIABILITIES 82,441 48,722
TOTAL EQUITY AND LIABILITIES 234,408 205,504
The financial statements were approved and authorised for issue by the board
of Directors on 28(th) March 2023 and signed on its behalf by:
Eric Zurrin
Anthony Durrant
Chief Executive
Officer
Chairman
Consolidated statement of changes in equity
Share Share Share Convertible Translation Shares Retained Total
capital premium option loan notes reserve to be deficit Equity
reserve reserve issued
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Total equity 1 January 2021 149 210,344 338 5,374 450 1,043 (51,776) 165,922
Loss and total comprehensive expense for the year - - - - - - (6,168) (6,168)
Total comprehensive expense for the year - - - - - - (6,168) (6,168)
Share based payments 1 1,012 - - - (1,043) 30 -
Lapsed options - - (156) - - - 156 -
Exercised options - 34 (34) - - - - -
Repayment of convertible loan notes - - - (5,374) - - 5,374 -
Dividend payments (note 30) - - - - - - (2,972) (2,972)
Total equity 31 December 2021 150 211,390 148 - 450 - (55,356) 156,782
Loss and total comprehensive expense for the year - - - - - - (2,299) (2,299)
Total comprehensive expense for the year - - - - - - (2,299) (2,299)
Share based payments - - - - - - - -
Lapsed options - - (148) - - - 148 -
Exercised options - - - - - - - -
Repayment of convertible loan notes - - - - - - - -
Dividend payments (note 30) - - - - - - (2,516) (2,516)
Total equity 150 211,390 - - 450 - (60,023) 151,967
31 December 2022
Consolidated statement of cash flows
31-Dec 31-Dec
2022 2021
Notes US$'000 US$'000
Net cash flows generated from operating activities 24 11,753 12,586
Investing activities
Purchase of plant and equipment (42) (206)
Purchase of right of use assets - (14)
Purchase of assets under construction (29,529) (18,002)
Mine development expenditure (8,387) (8,494)
Net cash flows used in investing activities (37,958) (26,716)
Financing activities
Loans repaid (6,003) (2,655)
Principal paid on lease liabilities (1,301) (1,134)
Interest paid (1,361) (816)
Purchase of silver to fulfil silver stream obligation - (354)
Buy-back of convertible loan notes 20 - (9,807)
Equity dividend paid 30 (2,516) (2,972)
Loans received (net of loan arrangement fees) 19 28,000 1,000
Movement in restricted cash - 2,500
Net cash flows received from / (used in) financing activities 16,819 (14,238)
Net decrease in cash and cash equivalents (9,386) (28,368)
Cash and cash equivalents at beginning of year 13,214 41,582
Cash and cash equivalents at end of year 3,828 13,214
1. General information
Shanta Gold Limited (the Company) is a limited company incorporated in
Guernsey. The address of its registered office is 11 New Street, St Peter
Port, Guernsey, GY1 2PF. The nature of the Group's operations and its
principal activities are set out in the Chairman's statement, the Chief
Executive Officer's review and the Directors' report published within the 2022
Annual Report.
These financial statements were approved and authorised for issue by the Board
of Directors on 28 March 2023 and signed on its behalf by Eric Zurrin and
Anthony Durrant.
The financial information set out herein does not constitute the Group's
statutory financial accounts. This information has been derived from the
Group's Annual Report and full financial statements for the year ended 31
December 2022 which were approved and authorised for issue on 28 March 2023
and upon which the auditors have reported without qualification.
The Group's 2022 Annual Report and financial statements will be distributed to
shareholders and made available on the Company's website at
http://www.shantagold.com on 29 March 2023.
2. Basis of preparation
The consolidated financial statements have been prepared under the historical
cost convention except for certain financial instruments which are carried at
fair value, as explained in the accounting policies below. They are presented
in US Dollars, which is also the Company's functional currency. Amounts are
rounded to the nearest thousand, unless otherwise stated.
The financial statements have been prepared in accordance with UK adopted
international accounting standards.
The preparation of financial statements in compliance with UK adopted
international accounting standards, requires the use of certain critical
accounting estimates. It also requires Group's management to exercise
judgement in applying the Group's accounting policies. The areas where
significant judgements and estimates have been made in preparing the financial
statements and their effect are disclosed in note 3.
3. Going Concern
The Directors have performed an assessment of whether the Group would be able
to continue as a going concern until at least December 2024. In their
assessment, the Group has taken into account its financial position, expected
future trading performance, its debt facilities, future debt servicing
requirements, its working capital and capital expenditure commitments and
forecasts.
Based on a review of the Group's budgets, cashflow forecasts and its ability
to flex its future exploration spending to suit prevailing circumstances, the
Directors consider that the Group has adequate resources to continue in its
operational existence until at least December 2024. Key assumptions
underpinning this forecast include consensus analyst gold prices and
production volumes in line with annual guidance.
At 31 December 2022 the Group had an unrestricted cash balance of US$3.83
million and available liquidity of US$10.47 million. Despite delays in
recovering VAT, the Group has sufficient operating cashflows to continue to
operate for the foreseeable future, including meeting contractual debt
repayments until at least December 2024, and that at this point in time there
are no material uncertainties regarding going concern.
The Directors have concluded that these circumstances form a reasonable
expectation that the Group has adequate resources to continue in operational
existence, until at least December 2024. For these reasons, the Directors
continue to adopt the going concern basis in preparing the Annual Report and
Accounts.
4. Loss per share
Basic loss per share is computed by dividing the loss attributable to ordinary
shareholders by the weighted average number of ordinary shares outstanding
during the year.
31-Dec 31-Dec
2022 2021
US$'000 US$'000
Loss for the year attributable to equity holders of Company (2,299) (6,168)
Loss used in calculation of basic earnings per share (see below) (2,299) (6,168)
Basic loss per share (US cents) (0.220) (0.589)
Weighted average number of shares in issue 1,047,885,766 1,047,885,766
There were no share incentives outstanding at the end of the year that could
potentially dilute basic earnings per share.
5. Loan and other borrowings
31-Dec 31-Dec
2022 2021
US$'000 US$'000
Current liabilities
Silver stream (19.1) 1,347 1,158
Loans payable to Standard Bank less than 1 year (19.2) 3,114 -
Stanbic overdraft payable (19.3) 3,000 1,000
Lease liabilities (note 13) 665 665
8,126 2,823
Non-current liabilities
Silver stream (19.1) 2,045 2,695
Loans payable to Standard Bank more than 1 year (19.2) 16,580 -
Lease liabilities (note 13) 691 759
19,316 3,454
Total loans and other borrowings 27,442 6,277
(1) Silver Stream
The Company entered into a silver streaming agreement ("SSA") with Silverback
Limited ("Silverback"), a privately held Guernsey-based investment company,
under which Silverback paid the Company an advanced payment of US$5.25 million
on closing. Silverback will also pay the Company an ongoing payment of 10 per
cent. of the value of silver sold at the prevailing silver price at the time
of deliveries which will be made annually. The SSA relates solely to silver
by- product production from New Luika with minimum silver delivery obligations
totalling 608,970oz Ag over a 6.75-year period. There is a requirement to
settle any shortfall in silver delivery from the minimum obligation in cash.
The term of the SSA is 10 years during which time the Company will sell silver
to Silverback and receive ongoing payments of 10% of the silver sold at the
prevailing silver price. However, the Company has no minimum ounce obligations
after 2022. The payable silver by the Company to Silverback can be reduced
should there be any plant expansion as verified by an independent engineer.
Following an assessment from an independent engineer during 2021, a plant
expansion was verified as having occurred by the commissioning of a new mill
at NLGM. This change reduced the silver stream liability and has been
accounted for as an adjustment for the value in future estimates. The Silver
Stream liability was re-estimated in 2022 to include the extension to life of
mine plan. The liability is calculated using the forward silver price and
interest at the effective rate is imputed interest.
Silver Stream 31-Dec 31-Dec
US$'000 2022 2021
At 1 January (3,853) (5,590)
Value of silver transferred 1,221 1,231
Interest at the effective interest rate (note 7) (1,180) (1,341)
Adjustment for the value in future estimates (note 6) 421 2,464
Change in estimate (note 7) - (617)
At 31 December (3,391) (3,853)
(2) Loans payable to Standard Bank
In July 2022 the Company entered into a long term facility agreement with
Standard Bank Tanzania. The facility is for a principal amount of $20 million
and has a term of 4 years at an interest rate of 8.34%. Repayment is in 12
equal capital repayments from September 2023.
(3) Stanbic overdraft payable
The Company entered into an revolving loan facility with Stanbic Bank in
Tanzania to fund short term working capital. The facility is for US$ 5 million
of which US$ 3.5 million has been drawn down at year end. Each draw down is
repayable after a maximum of 180 days and bears interest at 10% per annum.
There are no securities held against the loan.
6. Net cash flows from operating activities
31-Dec 31-Dec
2022 2021
US$'000 US$'000
Profit before taxation for the year 2,919 1,000
Adjustments for:
Depreciation/depletion of tangible assets 16,190 16,039
Amortisation of right of use assets 535 961
Unrealised exchange gains 7 (63)
Non-cash settlement of Silver Stream obligation (note 10) (1,221) (1,231)
Finance income (425) (3,012)
Finance expense 3,535 6,679
Increase in provisions (145) -
Operating cash flow before movement in working capital 20,977 20,373
(Increase) / decrease in inventories (8,973) 2,806
Increase in receivables (8,431) (4,431)
Increase in payables 8,699 4,961
12,690 23,709
Taxation paid (938) (11,124)
Interest received 1 1
Net cash flow from operating activities 11,753 12,586
ENDS
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